After a devastating setback, Workhorse Group (WKHS) must redefine the marketing strategy going ahead. The corporate was correctly constructing an order e-book past the massive electrical van contract with the USPS, however the failure to acquire any portion of the contract was surprising.
Workhorse has seen its share worth fall under $20, however buyers shouldn’t rush into the inventory till the mud settles and the corporate outlines life with out the USPS.
Oshkosh Steals the USPS
Workhorse has labored with the USPS for years on suppling the mail service with a workable electrical supply van. The USPS had plans for ordering as much as 180,000 EVs to switch their present fleet and had utilized prototypes from Workhorse for testing functions.
On February 23, the USPS introduced a take care of Oshkosh to switch the present supply fleet over the subsequent decade with a Subsequent Technology Supply Automobile (NGDV). The corporate will make investments $482 million to finalize a manufacturing design and manufacturing facility to finally assemble from 50,000 to 165,000 EVs within the subsequent 10 years.
The USPS lists the total Postal Service fleet at 230,000 automobiles with 190,000 mail supply automobiles. Oddly, the USPS doesn’t plan to switch all the mail supply automobiles over the subsequent decade and the press launch leaves the choice for fuel-efficient inside combustion engines as a part of the fleet going ahead.
Workhorse at all times confronted an uphill street for the total USPS deal contemplating the corporate lacked the manufacturing capability to provide hundreds of EVs a 12 months. For 2021, the corporate solely set a manufacturing quantity goal of 1,800 automobiles after failing to even meet a goal of 300 automobiles in 2020.
Over a decade, Workhorse would solely produce 18,000 automobiles at this charge. The corporate would’ve wanted to extend the manufacturing output practically 10x to succeed in the unique hope of a contract for 180,000 automobiles.
Buyers had thought the USPS would cut up up the order to a number of producers so shedding the entire order was a shock. Now the market must focus solely on the backlog of as much as 8,000 EV orders at present on the books.
Analysts have Workhorse producing 2021 revenues of $139 million and 2022 revenues of $311 million as the corporate grows from lower than 300 car deliveries in 2020. Most of these revenues must be stable contemplating these income targets have been based mostly on non-USPS orders, however the enterprise upside into 2023 and past will likely be questioned right here. Analysts must lower estimates for Workhorse reaching annual revenues topping $1 billion.
The important thing investor takeaway is that Workhorse isn’t completed as a progress story within the EV supply van area. The corporate nonetheless has different contracts and the shortage of the USPS deal might open up different alternatives.
For now although, buyers ought to simply watch the inventory from the sidelines as a listed market valuation of $2 billion could be very wealthy for a corporation lacking 2020 targets and shedding out on a significant contract. As the corporate hits the drafting board and comes out with a brand new recreation plan, buyers can rethink the inventory seemingly at decrease ranges.
Wall Avenue is considerably divided on WKHS shares, a circumstance mirrored within the Reasonable Purchase analyst consensus ranking. That ranking is predicated on 6 evaluations, together with 3 Buys and three Holds. (See WKHS inventory evaluation on TipRanks)
Disclosure: No place.
Disclaimer: The knowledge contained herein is for informational functions solely. Nothing on this article must be taken as a solicitation to buy or promote securities.